Tax relief for businesses affected by Covid-19.

The lockdowns and social distancing measures caused by the Covid-19 pandemic have left many businesses with cash flow issues, with some not opening their doors at all during this unprecedented period. As a result, the Australian Government has announced a number of tax concessions and cash flow support for businesses to help them survive.

In this article, we will look at the Covid-19 tax relief packages available for businesses at both the Federal and State level.

The article will cover everything you need to get help from the government for your business if it is suffering from the effects of the pandemic, plus we provide some useful links where you can learn even more. Read on to learn about the Covid-19 tax relief packages available for businesses.*

Federal Government Stimulus Package.

The economic stimulus package is made up of a number of different components and parts to support as much of the economy as possible. Below are the things covered by the package:

  • Support for business capital investment through enhanced tax concessions
  • JobKeeper payments to protect jobs and keep staff employed
  • Specific and targeted support for the sectors, regions, and communities most affected by the pandemic
  • Cash flow assistance for small and medium-sized businesses and not-for-profits to help them stay in business
  • Credit flow support measures, like the government guarantee of 50% support for new short-term unsecured loans for small and medium businesses
  • Temporary relief for businesses experiencing financial stress, including relief from any personal liability for trading while insolvent for directors
  • Stimulus payment support for households and individuals
  • Temporary measures allowing early access to superannuation and a reduction of the superannuation minimum draw down rates.

Stimulus and relief packages.

The first coronavirus relief package was announced by the Federal Government back in March 2020, worth AUD17.6 billion. A second announcement followed soon after, bringing the total of the relief package to AUD189 billion at that time. The JobKeeper package announcement – worth AUD130 billion – was made at the end of March 2020 alongside a health package. Further announcements of more relief followed as the situation unfolded.

The relief measures were put in place to support as many businesses as possible and keep them operational to reduce unemployment. But what does this mean for taxes? A lot of concessions were made for capital investment, like enhanced tax write-offs for depreciable assets, plus cash flow support to practically all businesses. Relief for State-based taxes was also announced by all States and Territories, which we covered here.

JobKeeper payment.

The JobKeeper program was announced by the Federal Government on 30 March 2020. It includes a wage subsidy to help businesses keep as many staff employed throughout the pandemic. The subsidy consists of a AUD1,500 fortnightly payments per each eligible employee. The payment is made to practically all types of employers and also businesses without employees (self-employed individuals). The initial part of the program finished in September 2020 though it was further extended by six months through to March 2021, with a lower two-tier payment structure.


Enhanced tax concessions for capital investment.

The concessions below are available for all businesses with an aggregated turnover of up to AUD500 million, in relation to business capital investment for depreciating assets:

  • The instant asset write-off has been increased by expanding the already existing depreciating asset write-off. This means that it provides an immediate tax deduction for the cost of a depreciating asset, second-hand or new, with a cost of less than AUD150,000 – an increase from the previous AUD30,000 limit. The expansion is temporary, and the original announcement covered eligible depreciating assets that are first used, or installed ready to use, from 12 March 2020 up to 30 June 2020. In June, however, the Government extended the measure until 31 December and expanded it to apply to eligible depreciating assets that are first used or installed ready for use from 12 March 2020 until 31 December 2020.
  • All newly acquired depreciating assets (this excludes anything second-hand) benefit from the Backing Business Investment with an accelerated depreciation deduction. What this concession does is provide a tax deduction of 50% of the cost of an eligible asset on installation, while the existing depreciation rules still apply to the balance of the asset’s cost. This measure is applicable towards eligible new depreciating assets obtained from 12 March 2020 and first used or installed by 30 June 2021. There is no limit to the cost of a depreciating asset that qualify for this concession, which means that it covers all new depreciating assets.

There’s a new depreciating asset write-off in place for the 2020-21 financial year, applicable to businesses with an annual aggregated turnover of up to AUD5 billion. Called the temporary full expensing measure, it will likely override the initially announced measures detailed above. Going forward this will be limited to assets or entities that do not qualify for the new measure.

The measures are far-reaching and cover close to 99% of Australian businesses, which is an astonishing number.

RELATED: Key dates for the Australian tax year.

NFPs and SMBs cash flow boost.

Small and medium-sized businesses as well as NFPs are entitled to receive a cash flow boost, made as an automatic payment or credit applied on activity statement obligations starting from AUD20,000 and up to AUD100,000. It also covers businesses with an aggregated turnover of less than AUD50 million that have employees. This is an automatically delivered cash flow, applied through the tax system.

To find out in detail how you can benefit from it, read all about the ‘Boosting Cash Flow for Employers’ ATO guide here.

Trainee and apprentice wage subsidy.

Small and medium businesses can further benefit from a cash flow boost if they employ an apprentice or a trainee. The announcement covers eligible small businesses employers with up to 20 full-time employees, offering a wage subsidy if they retain a trainee or an apprentice who was in training with them as of 1 March 2020. The subsidy was consequently expanded to include medium-sized businesses with less than 200 employees.

Administrative relief available from the Australian Taxation Office.

As many taxpayers are experiencing difficulties with cash flow and finances, the ATO offers numerous administrative measures to assist taxpayers during this challenging time. A few of the options available to businesses affected by the pandemic are:

  • It’s possible to defer the payment date of amounts due through the business activity statement (BAS). This also includes the Pay As You Go (PAYG) installments, plus income tax assessments, FBT assessments and excise.
  • Businesses on a quarterly reporting cycle are allowed to opt into monthly GST reporting, meaning they can gain faster access to net GST refunds, if they are entitled to them.
  • With the PAYG stimulus, businesses are allowed to change their PAYG installment amounts, including to zero. Businesses paying varied PAYG installments are eligible to claim a refund for prior installments made in respect of the same income year to get PAYG relief.
  • Remitting any interest and penalties incurred on or after 23 January 2020 that have been applied to tax liabilities.
  • Low-interest payment plans are available for businesses affected by the pandemic to help them pay on-going and existing tax liabilities.

The above is not just limited to businesses, as similar assistance is available to individuals feeling the negative financial effects of the pandemic.

The ATO is taking a tailored approach to helping financially distressed businesses, which makes up a part of the broader relief package. The ATO has pledged to work closely with directors and businesses struggling to fulfill their tax obligations in order to find individual solutions, based on specific circumstances. This may include measures like withholding enforcement actions (Director Penalty Notices) and wind-ups.

To ensure that measures go to those in need, access to the measures is given after a case-by-case assessment. More information is available on the ATO website.

State and Territory tax relief measures.

An announcement by the States and Territories detailed their own stimulus package. Most are offering a number of ways to support businesses, specifically in relation to payroll tax relief. The package also includes land tax deferrals, land tax rebates, waiving of rates and licensing fees, and rent relief for commercial tenants in government buildings. Below is a quick rundown of all the measures available in each state:

New South Wales

  • Payroll tax deferral
  • 25% discount on payroll tax
  • Deferral on parking space levy
  • Extended payment time frames and part-payments
  • 25% discount on land tax

Victoria

  • Payroll tax waived
  • Liquor license fees waived
  • Land tax deferral
  • 25% discount on land tax

Queensland

  • Payroll tax relief
  • Liquor license fees waived
  • Land tax deferral

Western Australia

  • Payroll tax waived
  • Interest-free payment plans
  • Land tax relief
  • Waived penalty tax

South Australia

  • Waived payroll tax
  • Land tax relief
  • Waived liquor license fees

Tasmania

  • Payroll tax waived
  • Waived payroll tax for JobKeeper wages
  • Payroll tax rebate
  • Waived land tax

Northern Territory

The Northern Territory’s Government Hardship package includes payroll tax relief for businesses that are able to demonstrate hardships caused by the coronavirus pandemic. For a detailed read of the State and Territories relief packages for businesses, click here.

If your business is struggling from the effects of the pandemic, you can rest assured that help is available to support you and your business during this difficult time. Some of the things you can do include learning how to reduce your business tax bill, and also how to do your tax return if you closed your doors during the pandemic.

*We endeavour to provide accurate material for Australian businesses consistent with Australian tax laws; however, this material is for reference only and is not designed to be, nor should it be regarded as professional advice.